Bonus

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DEFINITION of 'Bonus'

1. Additional compensation given to an employee above his/her normal wage. A bonus can be used as a reward for achieving specific goals set by the company, or for dedication to the company.

2. Dividends paid to shareholders from funds created out of additional profits realized by the company.

3. A premium paid for accepting an agreement. Sometimes referred to as a "signing bonus".

4. Anything over and above what is expected.

INVESTOPEDIA EXPLAINS 'Bonus'

1. Bonuses can add up to the majority of some employees' compensation. For example, Goldman Sachs CEO L. Blankfein received $68 million in cash and stock as a 2007 bonus, but only made $600,000 in salary. Due to these high amounts, corporate compensation is public information in public companies.

2. These bonus dividends are paid to specific shareholders. The board of directors would approve payment, and can also decide to stop dividends at its discretion.

3. Signing bonuses are used as an incentive to obtain employees or contracts. The initial payment is designed to entice the signing of an agreement that will cost the company more now for higher future benefits.

4. A realized benefit that was not intended or planned.

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